FlipKart recently raised $1 billion in capital to expand its e-commerce offering in India. Amazon then announced $2 billion of investment in India. Snapdeal which is the second largest e-commerce platform in India behind FlipKart is about to be surpassed by Amazon. Clearly the opportunity in Indian e-commerce segment is huge but why so much money and what are the challenges to growth?
If one reads the pundits Amazon’s dominance of the Indian e-commerce market is as inevitable as the waterflows of the river it is named after. The reason is Amazon can outspend any competitor in offering fast delivery and a broader catalogue of items. While neither FlipKart nor SnapDeal can directly compete with Amazon on those fronts they can compete with the behemoth in other ways.
The primary zones for Amazon’s fulfillment centers are focused on the large metropolitan cities. Amazon is concentrating its resources to deliver on the promise of fast delivery in these areas. Both FlipKart and SnapDeal should leverage their native capabilities and focus on selling to and securing the markets in the vast rural communities of India where there is a more even footing upon which to compete. For family members who live in a large city but wish to order items for family members in rural areas having an e-commerce platform that delivery to those communities would be a solid point of differentiation.
The other point of differentiation is with payment. India’s mobile commerce market is quickly developing its own ecosystem. Leveraging the preferred payment platforms versus the standard payment systems available on Amazon would also give Indian e-commerce vendors a solid point of differentiation in the market.
The founders of SnapDeal and FlipKart would do well to read Vikram Akula’s book “A Fistful of Rice”. His book speaks to the opportunity in India’s masses via the application of microfinance. Addressing the needs of the rural communities via e-commerce could yield a bounty of loyal and numerous customers that will help maintain the dominant market share over the long term.